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Demand For New Homes Continues To Power Hong Kongs Residential Market

Demand for New Homes Continues to Power Hong Kong’s Residential Market

 

In July, demand for fist-hand mass residential units remained the key driver of Hong Kong’s residential market. Several new projects were launched in July and 7, 792 homes were sold, an increase year on year of 95.5%. Early August saw a continuation of this trend, with Shau Kei Wan’s Le Riviera, for instance, selling 21 of its first 30-unit batch on the first day of its launch.

BermudaIn the secondary market, the limited supply of small homes and vendors’ disinclination to budge much on prices meant there was far less movement. New projects offering sweeteners outperformed second-hand homes significantly, as with the Mont Vert I in Tai Po, where owners Cheung Kong sold 140 of the second 246-unit batch on the first Saturday of August alone. Sweeteners on offer can include discounts or other incentives.

The luxury real estate market in Hong Kong saw several major transactions recorded in July, notably the sale of the third Opus flat in Mid-Levels East for HK$430m (€42.9m/£34.4m). Much of the ground has been cut out from under international luxury sales due to multinational companies’ tighter housing budgets and a shift to personal leases. As a result, there was little rent increase in this sector, with the average rental staying steady at HK$41 (€4.00/£3.29) per square foot per month, and this is expected to remain about the same throughout 2014.

The mass residential market in Hong Kong has been strongly affected by an influx of overseas students looking for accommodation. The summer is a traditional seasonal peak as these students seek to get their accommodation in order before the beginning of the academic year, and strong demand, especially from mainland Chinese students, drove up the prices in this sector by about 5-10%, with the largest increases concentrated in areas near campuses in Sha Tin, Fanling, Hung Hom, and Sai Ying Pun. Developments in these areas, like Whampoa Estate in Hung Hom, are reporting record prices as a result of this upward pressure.

That pressure has had to overcome a rise in supply, though it has been assisted by increased demand from home upgraders as well as buyers. Mass home prices are predicted to remain stable, and if they fall, to fall by less than 5% across the year.

The positive news from Hong Kong comes as the picture for the rest of China darkens. Investors in China are pulling out of a market they’re losing confidence in and taking their money to Europe and the USA, as Chinese home prices fell nationwide, with three consecutive monthly declines pointing the way to the newly-liberalised Chinese market’s first-ever correction. Recently-enacted curbs on real estate designed to cool an overheating market have been rescinded in an effort to breathe new life into Chinese residential property, but it may be too late. Already Singapore has overtaken China as the prime source of Asian real estate capital – and capital is flowing out of Asia to the tune of US$16.2bn (€12.4bn/£10bn), representing a 40% year-on-year rise. Only a few strongholds, Hong Kong among them, are exempt from the general outward flow of money from the Sinosphere and the Pacific rim.

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